Putting L&A Insurance Tools Directly in Consumers’ Hands

Talk to senior life and annuity (L&A) insurance executives, and you’ll hear a common theme: How best to adapt to the rising customer expectations and disruptive changes underway?

Consumers, especially millennials, who are accustomed to one-click ordering on Amazon or Uber, don’t understand why buying life insurance needs to be so confusing and time-consuming. They expect simplified products, customized advice and the ability to buy easily online.

The instant economy has already arrived throughout the financial services industry. For example, Quicken Loans, which relies on a direct-to-consumer model promising a simplified application process with rapid approvals, is now the nation’s top home lender.

Unless L&A insurance businesses adopt new ways of interacting with their customers, they run the risk of becoming relics. As new digital advice and sales models emerge, their principal competitors may soon be not just traditional insurers but also a digital giant that’s looking to expand into new industries, or an insurtech startup they’d never heard of before.

Using AI to Shift to a New Model

To respond, L&A insurers must simplify the process of selling direct to the consumer, by leveraging the power of artificial intelligence (AI) technologies, such as natural language processing, machine learning, voice recognition and predictive analytics. These technologies can help insurers micro-target customer segments and then automatically develop and deliver customized product recommendations. By employing chatbots and robo-advisors, they can enhance the customer experience, streamline the sales process and slash operating costs. As technology capabilities evolve, insurers will come ever closer to the lofty goal of treating each consumer as a segment of one.

Some L&A insurance companies are already demonstrating what is possible:

Consumers can get a life insurance quote from Legal & General Americajust by submitting a selfie photo, which is analyzed to estimate their age, gender and body mass index (BMI). Although the technology is not used for underwriting, it is helping the company attract younger consumers.

Although AI promises to provide more objective advice, as these applications continue to learn from new data, they can develop unexpected biases of their own. Insurers will need to put strong policies and procedures in place to ensure that the decisions made by their AI applications are aligned with the company’s and society’s values.

Speeding the Pace of Change

Many L&A insurance businesses, particularly those that have largely grown through acquisition, will find that implementing a direct-to-consumer strategy will require them to modernize IT infrastructures that currently consist of a patchwork of under-powered legacy systems. While some companies will choose to rely on internal resources to accomplish this, many have been dissuaded by the large upfront capital investment and time required.

Change is coming fast to the life and annuity business. The insurers that are able to prosper in the turbulent days ahead will be those that embrace the customer-focused, digitally-driven business model now coming into view.